Dealing With Debt
When families describe wrestling a large debt to the ground by cutting expenses, they typically mention paring down expenditures such as entertainment subscriptions and eating out.
Zack McCullock and his wife did all of those things, but the couple took a more dramatic step to cut the biggest expense for most families, namely the cost of their housing.
The McCullocks traded the four walls of a residence for the frugal minimalism of a camper vehicle, in which they lived for some 10 months, dramatically reducing both housing costs and some of the creature comforts of a home. In the process, they also discovered that maybe they didn’t need quite as much stuff as they thought. After returning to a traditional residence, they made a further dent in their debt by selling off some possessions they found they no longer needed.
This interview has been edited for length and clarity.
What was your total debt, and how did you acquire it?
My wife and I had $40,000 of debt from student loans and $10,000 of debt from a car loan.
Was the debt worth acquiring?
Not many 18 or 19 year olds consider what their college experience will cost them once they graduate. Overall, I think we both agree that going to college was a worthwhile experience, although looking back we both wish we would have considered finding alternative ways to pay for school such as scholarships, grants or even attending community college the first two years.
What motivated you to pay it off?
When we arrived home from our honeymoon in the Bahamas in 2014, we knew we wanted to prioritize our finances. We discovered that arguing about money was a top predictor of divorce, so we decided that becoming debt-free would be a good start to taking care of our money.
What was your plan to reduce your debt?
Our plan to reduce our debt was simple: cut our expenses as much as possible and put all disposable income toward paying down our debt. To do this, we first reduced our housing expenses by purchasing a camper and deciding to live in it for 10 months to pay down our debt. That was not the only thing we did though; we searched for cheaper car insurance, cut monthly recurring expenses such as Netflix, Hulu, and Audible subscriptions. We stopped purchasing books from Amazon and started getting them from the library. Most of all, we started tracking how much we were making each month and tracking our expenses and reducing all of the “unnecessary” expenses that we could. We didn’t use any special services or tools, instead we took the time to write down everything and see how much we could cut back on. Additionally, we ended up generating a good amount of additional cash to put towards our debt by selling stuff from our home that we no longer needed or didn’t need.
How did you stay on track?
Our friends and families were extremely supportive and encouraging during this process. We often say that your support network can make or break your success when becoming debt-free. It’s so important to not only make a plan but to have the accountability to help you keep it. We found motivation by reading personal finance blogs during our process. Bloggers continued to keep us inspired and gave us new ways of seeing how our journey to become debt-free would benefit us later. That's why we decided to launch our own personal finance blog, FreeUp – Your Money Your Freedom, and write about easy money hacks to help others improve their finances. We enjoy sharing what we have learned with others and also building a community that cares about financial freedom.
How long did it take you to pay off the debt?
It took us a little over 10 months to pay off our debt. We did have to adjust our strategy a couple of times because we failed to plan for some unexpected expenses. We really like using the S.M.A.R.T (Specific, Measurable, Achievable, Relevant, Timely) goal planning method when it comes to goal setting and we found it helpful in understanding how to set goals that are not only realistic, but also measurable.
What advice would you give to others struggling with debt?
Don’t worry about what everyone else is doing. Personal finance is more socially driven than anything else. Meaning we often do things because of social pressure, not out of necessity. There is a reason the term “keeping up with the Jones’s” is real and often used. It’s a phenomenon that many struggle with, including personal finance bloggers.
My advice would be to understand what your goals are first, whether that's paying off debt, starting your retirement fund, or just saving an emergency fund. Once you know your vision, set a realistic strategy to achieve it with several small goals along the way. Once you start doing this, you’ll probably have to adjust it, but if you stick to it you will ultimately succeed.
How do you remain debt-free today?
We have remained debt-free today by practicing what we preach. In reality, even though we're debt-free, we continue to live simply. We have discovered that happiness and fulfillment is not found in material items (although they temporarily make us feel good). Most of all, we’ve just decided that what we value is feeling secure financially and planning for our future. We have set our goals for retirement and we also still get to do the things we enjoy, like traveling and spending our money on experiences instead of things.